Virtually all customers of FINRA-registered broker-dealer firms (in essence, all broker-dealers) are required to arbitrate their disputes with those firms and their associated persons. Many of those disputes are required to be arbitrated in the FINRA Dispute Resolution forum. Currently, FINRA permits parties to be represented by non-attorneys (NAR) (subject to a few restrictions such as if state law prohibits it or if the person is currently
suspended or barred from the practice of law or the securities industry), primarily to allow parties a greater choice of and access to representation, even if not by an admitted attorney. In fact, several states still do not consider advocating for another in an arbitration to be the “practice of law,” so that non-attorneys would not be subject to unauthorized practice allegations for doing so in those states.
In its December 2015 Final Report and Recommendations, the FINRA Dispute Resolution Task Force “recommended that FINRA conduct a study to determine, among other matters, whether NAR firms are performing competently. FINRA’s review revealed that there are a small number of NAR firms regularly practicing.” FINRA’s review also revealed “activities” of those NARs that call into question whether they have exploited their “clients” through that representation.
FINRA recently issued Regulatory Notice 17-34 seeking public comment on the efficacy of NAR representation in the FINRA arbitration forum. Comments are due Dec. 18, 2017. I urge interested parties to submit comments, so FINRA can decide based on full input from all affected constituencies whether to take any further regulatory action with respect to NAR representation.
For those supporters (or haters) of the process of arbitration, even if you do not have specific expertise in FINRA arbitration, your input may be extremely valuable to ensure the integrity and reputation of arbitration more broadly.